To say Mother Nature has been unkind to the agricultural world is a bit of an understatement. A country known for its arid outback, Australia finally got out from a decade-long drought in the spring of 2010 only to run into a plague of locusts seemingly straight from the Bible.

Meanwhile, massive droughts across much of Russia during one of the hottest summers on record and far too much rain in the key crop-growing regions of western Canada forced grain bodies to slash their forecasts.

But as summer turned to fall and the harvest rolled around, prospects turned brighter.

“Turned out it was not quite as bad as everybody expected it was going to be. We were preparing for the worst with the problems in Russia, Australia and here, and fortunately, the rice crop in Asia was good,” Peter Hall, chief economist with Export Development Canada, said in an interview. “That would have been the straw that broke the camel’s back, and we’d be having a different conversation.”

Of course, weather is inherently unpredictable, but the problem is a bad crop year can create a cascade of problems in the following years, especially if a farm’s inventories were already low.

And this is where the agricultural world sits now — an industry at the mercy of Mother Nature, watching the skies nervously and hoping for the best.

“We can get through this crop year, but if we have another bad crop then, we will have a big problem on our hands,” he said. “At this point, we can only cross our fingers and hope we don’t have more of these weather-related incidents that compromise our supplies and inventories even more.”

Those hoping the new year would bring better luck have been wrong so far as the worst floods in decades have swept through Australia in recent weeks, leaving dozens dead and thousands homeless.

Keith Carpenter, agriculture analyst with Canaccord Genuity, noted in a crop update the country has already begun reducing its production estimates, although only modestly below recent U.S. Department of Agriculture estimates.

In the United States, the fear is now that “winterkill” will impact production estimates, while dry conditions in Argentina have produced some underwhelming forecasts for both corn and soy, he said in a report.

“Many of the issues concerning food security, availability of both grain and fertilizer supply and rising food prices have not faded away and are more likely to intensify in 2011,” Richard Kalertas, analyst with Dundee Securities, added in a note.

That said, it is perhaps too soon to write 2011 off, especially as the farmers who manage to get their crops to market are likely in store for even higher prices.

One of the key long-term drivers within the agricultural space is still going strong, as the world population continues to grow, David Sparling, professor and chair of agri-food innovation at the Richard Ivey School of Business, said from London, Ont.

A recent report from Deloitte Touche Tohmatsu predicted 70 million people will join the middle class each year, reaching as many as 800 million people by 2020.

And in rapidly developing countries such as India and China, the widening middle class is not only demanding more food, but more meat.

“You need four pounds of grain for one pound of meat,” Mr. Sparling said. “Long-term, we will continue to be an important bread basket for the world.”

And for Canadian farmers, who produce key crops such as wheat, barley, canola and pulse, productivity will be key to survival, especially if there is more rough weather ahead.

Farmers will need to find ways to use the tougher lands of the north, and explore genetically modified crops to an even greater degree.

“We need to produce more with fewer inputs and much greater resilience,” he said.

Canada is also strongly promoting the use of genetically modified foods in trade negotiations with Europe, he said. This could have a secondary effect opening up the African market, where many farmers have been afraid to use Canadian drought-resistant seeds as they can’t sell the resulting crops in Europe.

“We’ve been using [the strains] for more than a decade and haven’t had any adverse effects so it’s something they should allow,” Mr. Sparling said. “They’ve been talking for a year now and there might be something by the summer.”

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